Here are some buyer questions I hear a lot:
- What is a typical timeline for making an offer?
- How many offers will I have to make on homes before I have one accepted?
- Why are the ‘for sale’ prices so different from what the county tax appraisal says?
I love these questions! Question #2 especially indicates to me that the buyer is savvy about our particular market.
1. What is the timeline for making an offer? After further questioning, I find that the buyer usually means ‘How much time is there between looking at houses and going under contract? How much time from having a signed contract until I own the house?’
A couple of generalizations about this set of questions: are we talking about Austin? Or, are we talking about one of the surrounding cities? What is the price point?
Austin is generally the fastest-moving market because there are so many more buyers than there are available properties (hint, hint, Potential Sellers!). If you are not ready RIGHT NOW to make an offer and show the seller your ability to pay down payment, closing costs, and get a loan, you could be a day too late in getting the house you want. Once you start shopping, you could be getting an offer accepted in the next couple of days.
If you are looking in an outlying area, you might have days or weeks before you find what you want and have an offer accepted, BUT some situations require you to act as fast as you would in Austin. If it is a fabulous property at an appealing price, be prepared to act that very day, or it could be gone!
The next generalization about this question is: what is your price point? In general, the lower price-points, say $600K and lower in Austin and the lake area, and $350K and lower in outlying areas are highly sought-after and you will have lots of competition for that house. The price points higher than that tend to last longer on the market, but it is still true that a fabulous property at an appealing price will go quickly, especially if the price is under a million dollars for a truly million-dollar property and/or location.
If you have a cash offer accepted, you can close quickly- you will be waiting on the results of your own inspection, the title company’s commitment to what the property being passed to you legally is, and possibly, the seller’s schedule of when they can vacate the premises. I have heard of closes in just 4-5 business days, but it is typically 10 days or 2 weeks, realistically.
If you have a loan that needs underwriting, your close won’t happen in less than three weeks after you have a contract, although about 4 weeks is more typical. If you have a lender who is not motivated to get you to the closing table, it can take longer.
2. How many offers will I have to make before I have one accepted? The answer to this is dependent on the price range in which you are looking and on how close to your personal upper limit are you looking. The lower prices, say $250K and below, are full of buyers looking and making offers. I know many ways to make the offer really great for the seller, besides the sales price. BUT, the sales price you are offering is still the most important part of what you ‘lay on the table’ for the seller.
Which leads us to the second part of the question- how close are you to your personal upper financial limit in the homes you choose to look at? If you are already close to the top, you won’t have room to offer more, sometimes much more, than the asking price. Some of these properties receive 10, 20, or 30 offers in a couple of days. Being able to offer a lot more than the asking price becomes important, or you just lose out to someone who can. People looking at close to their upper limit in price might lose 5 or 6 offers before they finally have a contract on a house.
3. Why are the ‘for sale’ prices so different from what the county tax appraisal says?
The way I have had this explained to me in my real estate classes is this: there are three prices on a house; the price the county puts on the property, the price an appraiser says the property is worth, and the price the open market says the property is worth.
a. County appraisers are not necessarily trained, licensed appraisers. They might be people hired to drive around to see if there is anything obvious that has changed about the property since the last drive-by, and then the next year’s value is slapped on the property based on what the last year’s assigned value was, plus whatever increase in revenue the county might need to keep paving the roads, paying the sheriff, etc. Often, the county’s appraised value is lower than actual market value.
b. An appraiser has been trained to use algorithms plus experienced judgment to interpret the results in order to arrive at a value for the property. Your lender will hire an appraiser from the appraiser pool to calculate a value for the property before the loan is approved. You will pay for the appraisal at closing and not all lenders are careful to hire an appraiser who truly knows the peculiarities of the local market. I encourage you to use a lender whose policy is to “hire local” when it comes to appraisers.
c. The open market (available through exposure on the multiple listing service) will place a value on property for you. Given enough exposure, the current pool of buyers will select a price at which a property will be purchased. If the property you are looking at is listed by a competent agent who has been able to convince the seller of the reality of the market [both important caveats], the price you are looking at on the glossy brochure or pretty website is somewhat close to what a buyer will pay at this particular time. An exception would be if the seller, assisted by the listing agent, calculates that putting a lower price on a home will produce many more offers from which to choose. In this case, the listed price may be lower than you could expect to pay.
There is, of course, a lot more I could say about each of these questions, but this will get us started.
Photo from 2006, when I was with a church group that worked on new post-Hurricane Katrina homes for the musicians of New Orleans. These were built to be appealing, safe, and affordable to build up the community again.